MODULE 2
roll cages, barrels, kegs, pallets, tote boxes and trays
The Role of the Warehouse
Types of Warehouse Operation
There are many different roles for a warehouse in today’s supply
chain. Warehouses can be operated by raw materials suppliers,
component and finished goods, manufacturers, wholesalers, retailers,
and companies involved in reverse logistics.
The warehouses can be owner-operated or subcontracted to third-
party logistics providers.
These warehouses fulfill the following roles:
Raw materials storage
store raw materials and components either close to the point of
extraction or close to the manufacturing point.
Intermediate, postponement, customization or sub-assembly
facilities
store products temporarily at different stages in production.
Postponement and sub-assembly activities can include the
following:
● specific packaging or labeling being changed or added, e.g for store
ready items or printing in different languages;
● computer assembly to include different graphics cards, memory
chips, software, etc; ● product bundling for promotional activity;
● country-specific items being added such as electrical plugs; and
● special messages being added, eg stencilling of greetings messages
on mobile phones.
Finished goods storage
store products ready for sale, on behalf of manufacturers, wholesalers
and retailers. They provide a buffer or safety stock for companies,
enabling them to build up stock in preparation for new product
launches, expected increases in demand and to deal with seasonality.
Consolidation centres and transit warehouses
receive products from different sources and amalgamate them for
onward delivery to the customer or onto a production line.
These differ from cross-dock centres in that product can remain in the
centre for a period of time awaiting call-off from the final destination.
Many of these consolidation centres are operated by third parties.
Transhipment or break-bulk centres
Transhipment centres receive products in large quantities from
suppliers and break them down into manageable quantities for
onward delivery to various locations.
Cross-dock centres
Efficient consumer response and quick response within retail require
operations to be able to move goods quickly through the supply
chain.
Sortation centres
Sortation centres are used in the main by letter, parcel and pallet
distribution companies. Goods are collected from all parts of the
country, delivered into hubs or sortation centres, sorted by zip or post
code, consolidated and delivered overnight to their respective
distribution areas for onward delivery.
Fulfilment centres
The growth of e-retailing has seen an increase in the number of
customer fulfillment centres. These warehouses have been designed
and equipped specifically to manage large volumes of small orders.
Reverse logistics centres
Companies recognize that returning product to stock or disposing of
it quickly can positively affect cash flow.
Waste legislation has also resulted in large quantities of returned
packaging having to be disposed of in an environmentally friendly
manner. This includes sortation by type and use as fuel or recycled
material. There are case studies in the environmental section that go
into more detail on this subject
include the return of reusable transit packaging equipment such as
Public sector warehousing
Warehouses operated by third-party logistics providers are either
dedicated operations on behalf of a single customer or can be shared-
user or public warehouses where a number of different customers
share resources and are accommodated under one roof.
These include:
● companies with different products but with common customers
such as retailers or automotive manufacturers;
● companies with the same or similar products delivering to common
customers, eg tyre manufacturers; bicycle manufacturers,
pharmaceutical companies and multimedia companies (a typical
example is where Sony, Universal and Warner share a warehouse in
the United Kingdom);
● companies needing similar types of service, eg fulfilment or returns
processing; and
● companies requiring the same environmental conditions, eg
hazardous goods, explosives or temperature controlled.
Why do we hold stock?
Reasons for holding stock are as follows.
Uncertain and erratic demand patterns
Suppliers of ice cream, suntan lotion, umbrellas and the like will
potentially experience erratic demand patterns based on the
changeability of the weather. Other unpredictable sales can revolve
around the launch of a new product and the progress of a team in a
major competition such as football’s World Cup or baseball’s World
Series events
Trade-off between transport and shipping costs, justifying larger
shipments
The ability to move product in large quantities tends to attract lower
costs per unit. The trade-off here is between the cost of storing
additional units compared with the higher cost of transport for
smaller, groupage-type deliveries. If the transport cost is very
attractive then additional storage space will be required. There also
has to be a strong conviction that all the items purchased will be sold.
Discounts via bulk buying
The possibility of reducing the unit rate through buying in greater
quantities is always an attractive proposition for buyers. This can,
however, have a negative effect overall if the company fails to sell all
of the additional units purchased or has to sell at a loss to clear the
warehouse. In this situation it is our contention that the whole-life
cost of the item is calculated before the decision is made to purchase
additional quantities
Distance between manufacturer and the end consumer
the distance finished stock has to travel today requires a greater
amount of stock to be held in the warehouse. Lead times can be
anything between four and eight weeks depending on the
manufacturer’s location. The trade-off here is between more
expensive local suppliers and producers and increased costs in
transport and inventory holding costs.
Cover for production shutdowns
Many manufacturing companies and sectors continue to shut down
their operations for vacations, machine maintenance and stock
counts. As a result retailers and wholesalers need to build up stock
prior to the shutdown period to ensure stock availability for their
customers. Manufacturers will also build up a stock of components to
ensure that their production lines are not brought to a standstill as a
result of supplier shutdowns
Ability to increase production runs
Changing or adjusting production lines in order to accommodate
changes in models, color, design features, etc. is expensive. The
longer the production run, the lower the cost per unit to produce.
 condensation from settling on cold boxes, preventing structural
decay.

The focus on energy and carbon reduction has resulted in

To manage seasonal production
Certain food and drink products are produced at specific times of the
year and therefore need to be stored until required.
High seasonality
Seasonality can be a period of time such as summer and winter or a
specific date in the calendar such as Easter, Valentine’s Day,
Independence Day or the Chinese New Year.
Spare parts storage
To ensure an uninterrupted production line operation, manufacturers
need to hold stock of spare parts just in case an item becomes
defective. This can be expensive but the trade-off here is between the
cost of the part together with its holding cost and the potential
breakdown of the production line and the consequences that brings
with it. This doesn’t mean, however, that these items should not be
reviewed regularly and decisions taken as to whether to stock them or
not. Things to take into account include supplier lead time and
machine failure rate.
Work-in-progress storage
significant research in techniques by which to generate even
greater improvement. These include:
● a reduction in cooling demand by ensuring that product enters at
the correct temperature;
● improved plant design;
● improved operational management and maintenance;
● recovery of heat to use elsewhere in the business – hot water, space
heating, etc;
● examination of the use of CHP (combined heat and power) – tri-
generation; and
● consideration of low carbon electricity – wind, wave or hydro-
electric.
In addition, there are more radical approaches; with more positive
and closer store management attention. These are as follows:
● carefully review the cold-store room layout and thereby change the
temperature flows;

Many companies will part-build products in anticipation of orders. ● raise refrigeration evaporating temperature for a potential 11 per
The chocolate manufacturer mentioned above produces the two cent or more cost saving;
halves of the Easter egg prior to receiving any firm orders. This
● reduce refrigeration condensing temperature;
enables them to complete the process at a later date, once they know
the type of packaging, style and insertions required. ● seasonally adjust refrigeration to take account of external ambient
temperature;
Investment stocks
● where fitted, split cold-store and blast-freezer refrigeration
A number of products can increase in value the longer they are held
systems;
in storage. These include fine wines and spirits, cigars, precious
metals and stones, antiques and fine art. ● install and use variable-speed drive fans; and
Document storage ● focus on and manage more closely door opening design and
operations.
Both public bodies and private companies have an obligation to store
documents over a period of time. These can include correspondence, Safety and risk assessment:
invoices, accounts, etc. This can be a legal requirement. Other
examples include evidence storage and patient records by the
emergency services.

MATERIALS HANDLING AND STORAGE IN A

TEMPERATURE CONTROLLED ENVIRONMENT

A wide range of storage media is used, all with the intention of

optimizing storage capacity with accessibility, given the high fixed
and variable costs prevalent in the sector. The most popular are:

● Wide, narrow and very narrow aisle racking.

Used in faster-moving operations, particularly in order picking by

case and by unit. These suit secondary distribution layouts, where
access to a wide range of stockkeeping units (SKUs) is required, and
delivery lead times are short. Often reserve stock is held in a national
or primary distribution centre (NDC or PDC).

● Drive-in racking.

Used for bulk pallet storage and more frequently for longer-term
storage, to suit seasonal production and supply peaks or
production/packaging operations to meet different packing formats.

● Mobile racking.

Buildings must first be constructed with mobility in mind, as the

building needs substantial steel runners set flush into the insulated
cold-store floor surface. Popular with smaller companies that have
higher volumes to store but also need accessibility for range and
stock rotation.

● Automated storage.

consists of a variety of computer-controlled systems for automatically

placing and retrieving loads from defined storage locations.

● Energy management and plant maintenance

Energy is a significant operating cost, ranging from 12-30%. Factors

like building age, thermographic integrity, refrigeration plant
management, and equipment maintenance affect energy usage. Cold
stores require special attention to avoid heat ingress through panel
joints and doors. Annual thermographic scans are crucial to prevent
MODULE 3

RECEIVING

The receipt of goods into a warehouse needs to be a carefully planned

activity. On unloading, the goods are normally checked to ensure that
they are the correct items and of the required quantity and quality.

Some packages may require some form of processing. This can

include:

• Applying bar-code labels (e.g., attaching license plate numbers

(LPNs) to identify each pallet or sticking labels to each case).

• Palletizing (e.g., for goods received loose as cartons, as is common

in the case of containerized shipments).

• Re-palletizing (e.g., if the pallets are of the wrong type or of poor

quality).

• Placing into tote bins (e.g., to be put away into mini-load storage)

PRE-RECEIPT

We need to ensure that the supplier presents the products to the

warehouse in the most appropriate way.

the warehouse manager is also involved in specifying and agreeing

on the packaging, items per carton, cartons per pallet, TiHi (cases per
layer, layers per pallet) and any specific labelling required, together
with the mode of transport to ensure that the products ordered are
compatible with the storage facility

Areas that need to be discussed both internally and externally prior to

the order being placed should include:

● size and type of cartons;

● type of transit packaging – cardboard, plastic, totes, metal stillages,

roll cages, pallets;

● palletized or non-palletized delivery of product;

● size (length, width and height) and type of pallets, eg euro pallet,
four-way entry;

● specific labelling such as product description, barcode and

quantities;

● position of label on carton and pallet;

● carton quantities (inner and outer carton quantities, for example);

and

● mode of transport, delivery quantity and frequency of delivery.

IN - HANDLING

Handling a product the least amount of time possible leads to reduced

labour hours and as a consequence, reduced cost.

Preparation
Prior to the actual receipt a number of processes need to take place.
Initially you need to decide on when you are going to receive
products into the warehouse. Warehouse staff need to be aware of the
products being delivered, the type of vehicle and the equipment
required to offload. Once this has been ascertained and the time
calculated, a suitable booking slot is allocated and a booking
reference given to the supplier.

Where vehicles are unloaded in the yard this usually necessitates the
use of two lift trucks, one to

unload the trailer and another to put the product away within the
warehouse.